Equities Most Expensive vs. Commodities Than at Any Time Since 1970

Just another brick in the wall, just another example of the extreme valuations in the stock market and how unglued it has become from the underlying economic fundamentals to which, despite current appearances, it is forcibly tethered.

Imagine a bungee cord stretched to maximum tautness. The snap-back is fast, severe, and if you wait for it to start, it’s already too late to get out of the way. Gold and silver are as immensely compelling and ready for sharp gains as the stock market is ready for a dramatic collapse.

Compared to the stock market (the S&P 500), commodities are at their cyclical lows. As to what happens next, we need only look at a single chart:

Systemic trends and cycles are often causally connected and tend to reinforce each other. This is how a stable, wealthy and resilient society gets hollowed out: trends end and cycles reverse, and forces that added stability, capital and resilience when they were working together are slowly replaced by forces that erode the foundations of wealth and stability.

In the current era, eight interconnected trends/cycles are either reaching the end of their run or reversing:

Central bank distortion/manipulation of markets.

The business cycle of credit/debt expansion and contraction.

The yield/interest rate cycle.

The commodity cycle.

The stock market cycle.

Regulation.

Globalization.

Demographics.

We’re implicitly being told that stock markets can loft higher forever, as long as central banks are pumping out the financial stimulus. But nothing goes up forever; valuations get stretched, marginal buyers disappear and doubts about the continuing efficacy of central bank distortions creep in.